Tag Archives: heavy equipment industry

Competition in heavy equipment industry

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Today the heavy equipment industry is in great demand due to the huge growth in urban population and infrastructure projects. Heavy construction equipment is a critical tool for any construction project since they reduce the labor cost and time. A variety of these are present in market to serve different purposes of heavy construction work. Although all may not be required, it is imperative for the owner/builder to buy a sizeable amount of these equipment to ensure that work proceeds smoothly.

 

The existing heavy construction equipment market is dominated by large firms such as Caterpillar Inc. (U.S.), CNH Global N.V. (The Netherlands), Hyundai Heavy Industries Co., Ltd. (South Korea), Volvo Construction Equipment AB (Sweden), JCB Ltd. (U.K.), Komatsu Ltd. (Japan), Deere & Company (U.S). These companies provide advanced heavy construction equipment and by gaining considerable expertise and experience over the years, they have optimized their processes and practices to become even more efficient. These key players use different strategies such as expansions, agreements, contracts, joint ventures and partnerships to garner share in the market. They also focus more on the emerging markets in developing countries with inclination towards industrial growth. They also rely on regional and local distributors to increase their profits and presence in geographical markets. They also acquire companies or other business to meet the demands of heavy construction equipment.

 

There are challenges faced by these key players too. There is demand for machines which are highly efficient, safe, and reliable, with highest productivity and lowest environmental impact. Further, if fitted with the latest technology which is user friendly and with numerous applications it becomes more popular among users. In addition, there are changes in the heavy equipment industry due to advent of big data, analytics and advanced technology. Some new entrants in the market produce complex products using big data analytics which are cost effective, hence are in demand. Further competitive business analytics allows new analytics to assist in pricing, budgeting, improving management of demand and supply, minimize costs and risks and maximize profits. This has lead to a tough competition within the heavy equipment industry. Industries which are not interested in being tech-savvy will find themselves difficult to survive in such a competitive market.

 

To retain the position of a being a key player in heavy equipment industry, one has to have key strategies such as:

  1. Product and technology: Top priority of many key players is innovation of their products. Hence, they invest more in research and development activities.
  1. Improvement in operations: global expansion increases level of complexity which makes it important to improve basic capabilities and processes.
  2. A Go market Approach: to expand operations and business in the developed countries.
  3. In addition they should have winning strategies and should be prepared for the new changes in market. Although there is competition in heavy equipment industry, yet the companies which will have right business strategies, innovative products and can adapt to changing markets will survive and grow to make huge profits.
  4.  In addition they should have winning strategies and should be prepared for the new changes in market.Although there is competition in heavy equipment industry, yet the companies which will have right business strategies, innovative products and can adapt to changing markets will survive and grow to make huge profits.

Heavy equipment industry is fast catching up the rental market

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Heavy equipment companies may experience a hard time to sell their machines in the market. They might not find buyers at all times. Due to the cost of the machine which is invariably high, not many construction companies can afford to purchase them and at the same time the needs of the companies also change which means they have to keep on changing the heavy equipment as per their needs. Now it is certainly not feasible for a small construction house to keep buying machines as per the demand of the project. Therefore the best suitable option available to them is to rent the machine till the time they need them. Get done with their work and hand over the machine to its owner.

Though heavy equipment manufacturing companies do not directly deal with renting the equipment but there are entities that make good revenue by purchasing machines from the heavy equipment companies and then renting it out to the end users. Since they are dealing with new stuff, the rental amount one has to pay is comparatively higher than the ones given on rent by individuals. They may be slightly expensive but the quality of the equipment is unparalleled with any other machine listed by any individual.

On the other hand, the equipment possessed by these entities are thoroughly checked before it is listed on their website. So it means that when the guys who want the equipment on rent comes to get the machine, he can be completely assured that he will be taking the best with him. These entities are slowly catching up the heavy equipment rental market and they particularly believe that the year 2016 will be a great year for their business. It is primarily of two reasons. The first is the construction and mining industry are at its peak and it does not seem to come down at least in this year and the second reason is people want quality stuffs and they also need assurance which is provided to them by such entities.

It has been witnessed that people who take machines on rent have a hard time to convince its owners that the machine has developed some complication that was beyond his control and the giver of the machine penalizes him for the problem. This issue is somewhat managed if they take the machine from these small companies. Since these companies have their engineers who can work on the problem they do not fine the takers for anything and everything. This actually increases the confidence of the takers on these companies and they prefer to go with them. Moreover, they are also assured that these companies pick new machines either directly from the company or majorly from banks that confiscate heavy equipment over non- payment of installments.

These companies have quite easily won over the hearts of the contractors and small construction houses and have found a good opportunity to make decent income.

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Heavy equipment industry likely to grow in 2016

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The year 2016 has a lot of things in store for the heavy equipment industry. It has been predicted as the year of prosperity in the construction domain and therefore there will be an up-beat in the heavy equipment industry as well. The sale figure of heavy equipment is assumed to rise. However, it is to be seen that which company will make the most and which one will stand at the edge. The year 2015 has overall been a good year as far as the construction industry is concerned and experts have come down with the analysis that this year will be no different in spite of political uncertainties that has gripped most of the industries. It is perhaps the construction, mining and heavy equipment industry that will not bear the brunt of the uncertain and volatile market. It has more happy time to witness. Apart from minor hurdles things are expected to be well for the industries that are closely connected with the construction sector.

Since the construction industry is doing well, more such businesses are blooming and people are in the mood to buy more advanced heavy equipment. They being more concerned about the environment and hence things are gradually moving towards attaining environment friendly machines. This has given rise to an increase in the demand of heavy equipment that are low of carbon emission and does not harm the environment like the earlier versions. Countries like Germany have induced millions of dollars to produce eco-friendly heavy equipment because they feel that the future of heavy equipment is these eco-friendly machines.

Many other countries are following suit. Though they have not completely given up on producing orthodox machines, they are giving extra impetus on producing green machines. Talking about the overall heavy equipment industry, it seems that the companies in Europe have managed to rope in an increase of 19% in the total sales figure. This is quite a dramatic one as it was not so often seen in the last many years. The sales figure only suggest that on the whole the future of the construction segment is going to be terrific and people can expect to make good business. Not just the old construction house but even the newer ones are getting enough business which is indeed a very good sign for the entire business. Market experts are all happy with the way the market is performing but some are also asking companies to be a bit cautious and not overspend on buying heavy equipment.

The news headlines in the US is no longer coming up with stuffs that speaks ill about the industry. Though some companies may have suffered loses but that does not reflect the complete mood of the industry. So it seems things are better off in the US. If we check the Middle East, there are enormous growth opportunities present for the heavy equipment industry. Countries like Saudi Arabia has shown tremendous growth as far as the construction segment are concerned. This has further glorified the prospect of heavy equipment industry for the year 2016.

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Low oil prices affecting heavy equipment industry

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Oil prices have a huge impact on the construction industry as well as on the heavy equipment industry. In the last few years, we have seen the oil price were at its peak and were expecting it to come down. Not only the big industrialists but also the common man was getting badly bruised by the increase in the oil price. But how far the reductions in the oil price will help the heavy equipment companies has become the topic of concern. To put it in other words, does the reduction in oil price really make the business profitable for the heavy equipment industry or is it otherwise. Well, it can have a 2 way effect on the heavy equipment manufacturing companies.

Since for the last many years, oil prices were not ready to come down, which is why heavy equipment manufacturing companies were unanimously were of the opinion to manufacture equipment that will consume less fuel and will be high on productivity. This means that the machines which consume more fuel will slowly and steadily go extinct. Simultaneously, the new technology machine will also cost more to the buyers. This has put the heavy equipment manufacturing companies in a win-win situation as they can make good profits by selling low fuel consumption machines to big construction houses and can make good money out of it. Their plan was solid and also seemed to be fool proof as no one had anticipated that the oil prices can also take a dip in the near future.

Now when the price has come down, the construction houses are not showing much interest in buying machines that consumes less fuel. They are of the belief that since the oil prices are down, it is profitable to buy machines that eats more fuel as they will not cost them a fortune, use it for some years and then if there is an increase in the oil price which they expect would be in a gradual way, they will start looking for buyers. Small time contractors or small construction companies will not mind in buying those used machines at a lower rate. Therefore, the big companies will get their work done and when they see the oil prices are rising, they will get rid of those machines and then probably buy the ones that consumes less fuel.

If things go according to the construction companies wishes, they will be the one who will make the most out of it. However, things may not be as merrier as there is a possibility that the heavy equipment companies may stop manufacturing equipment that consumes more fuel which means the construction companies may have no option other than to buy those expensive machines. In other words, fall in oil prices will not have any positive impact in their company’s balance sheet. It is pretty obvious that the heavy equipment industry will not take a financial hit to please the construction companies and therefore will stick to producing machines with low fuel consumption.

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Best Options for Leasing Heavy Equipment for Construction Industry

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With the increase in construction projects the demand for leasing construction equipment has also increased tremendously. Construction industry is labour intensive as well as capital intensive. The contractors also need to use complex and diverse equipment such as Tractors, Excavators, and Loaders etc. Construction activities are numerous and diverse. Contractors have to manage and bring all the factors of production together such as land, labor, capital etc. Cost of all construction projects is an important factor .The contractors nave to control the budget and coordinate competent project supervision. Construction equipment are costly and the maintenance and repairing costs are also high. Specific heavy equipment requires qualified and skilled operators. Smaller contractors face financial constraints to buy heavy equipment since their budget is fixed. Bigger contractors lease or rent heavy equipments to be cost effective and also get the appropriate equipment for construction purposes.

Leasing is a lucrative option for both large and small contractors to cut down their expenses in construction projects. But there are several factors to consider before leasing heavy equipment.

 

Capital: When a contractor, project manager purchases new heavy equipment, they need to find out what are the best options available to them. The heavy equipment tend to decrease in value with daily wear and tear. So instead of making huge investments in buying them it is the best option to lease the heavy equipments to conserve money for unforeseen needs.

Equipment Supervision: Another factor to consider before leasing heavy equipment is equipment supervision. Heavy equipment such as scraper, cranes, excavators, loaders, rigging equipment are very costly. You need proper maintenance as well as dexterous operators to run them well. You may also require utilizing the professional operators to supervise the equipments and legalize their use.

Government Strategy: Government policies are important to consider before leasing heavy construction equipment. The government has laid down certain safety and security instructions regarding the superiority of the machines to be used in the construction site.

In the case of leasing, a contractor can ask for subtraction for the full price of the heavy equipment from the taxable earnings. Capital grants can be asked for the total price of the assets if you are leasing it for a time period of more than 5 years. In certain cases time period of 7 years is mandatory.

Wrap Lease: This leasing contract allows the contractors to merge some lease payments into a single, usual payment. This is an appropriate option for those building contractors who need to lease heavy equipment all of a sudden. Leasing combines their outstanding expenses and they can use it to invest in leasing new heavy equipment. This is extremely useful for those building contractors who are undertaking colossal and complex construction projects with volatile requirements and difficulties.

Fair Market Value Lease: Fair Market Value Lease is an extremely vital factor when you are considering leasing heavy building equipment. This option is beneficial in that case where there will be a fast decline in the value of the equipment due to usual wear and tear as a result of constant daily use. The repairing costs can be high too. These days a number of leasing companies are supplying services of expert workforce at no cost for performing maintenance and repairing work.

So leasing heavy equipment can be can be tricky task. Several factors have to be kept in mind before you make your decision to lease it. The article will give you all the information you need before leasing.

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